Why do we say this? Well, China’s output accounts for more than 50% of world steel production. Currently, China isn’t a major exporter to the U.S., but it is the biggest exporter to the rest of the world. Therefore, Chinese prices put a floor under international steel prices.

U.S. steel prices are now expensive again relative to Chinese prices. In the case of cold-rolled coil, the price spread stands now at $344 per metric ton, quite high compared to historical levels and not far from last summer’s peak of $420 per mt. A level that has proven unsustainable before.

What This Means For Metal Buyers

We continue to be long-term bullish on steel markets. However, buyers should closely monitor the recent divergence between Chinese and US prices. We should see a recovery in Chinese steel prices soon, otherwise US steel mills will have a hard time justifying further price hikes. Remember that we are in a global world and although US steel prices can temporarily move apart from Chinese prices, they will eventually move in tandem because otherwise, buyers will start looking to buy steel overseas.

Daniel,
I think we are saying either or could happen – but given the rise in coking coal costs in Asia, it might be more logical to think that Chinese prices would correct first before U.S. prices give back gains. However, U.S. prices have fallen slightly this week so clearly your point is valid…
LAR

Just for how long will it be possible for US steel-using manufacturers to pay considerably higher prices for their steel than their global competitors? The US steel industry’s influence in Washington, DC, is damaging to the economic interests of many US manufacturers.